What is the difference between Direct labor and Indirect Labor?

Direct Labor is the type of labor that is directly related to the manufacturing of products or goods in a factory. The workers are “directly” working on products either with machines or by hand.

Indirect Labor is the type of labor in a company that is not directly working with the production of the goods or services. The product can still be made without the indirect labor but the company will not continue to function properly without it over an extended period of time. Examples of indirect labor include managers in an office, supervisors in a factory who supervise the workers, presidents, vice-presidents and senior management in corporations and cleaning staff.

When it comes to costing out the labor, the costs of direct labor can be more easily built into a product. The costs of indirect labor are more difficult to establish and build into a product as the indirect labor cost may be attached to many products and over a period of time whereas the direct labor are the costs that actually went into producing the cost or service.